Office Buyers Focus on DC's Urban Core

WASHINGTON, DC—No, it wasn't your imagination. Investors in the Washington, DC area's real estate assets have doubled down on its urban core to the detriment of the suburbs, according to the latest JLL statistics.

The majority of sales activity, 73%, in first quarter was for buildings in DC, JLL reports. This compares to the historic average for DC versus suburban properties of 53.5% to 46.5%. A similar split was seen in leasing deals, JLL also noted, with 92.3% of all leasing activity over 20,000 square feet during in Q1 focused in buildings within a half a mile of an existing or planned Metro station.

To some extent, this is a story being played out across the nation, JLL Scott Homa told GlobeSt.com recently. "The traditional office park is plagued by lack of tenant demand in most markets--except for tech, which retrofits them with amenities--while core and fringe CBD assets as well as highly amenitized suburban submarkets, such as Reston Town Center, continue to rise in value and interest," he says.

Pricing is also following suit, at least for trophy assets, which are usually found urban areas.

JLL notes that trophy/class A investment sales on a per square foot basis has reached an all time high for an average $818. Also, the trailing 12 months appreciation in asset value for downtown trophy and Class A space is quite high at 20.3% compared to a historical average of 8.7%.

The metro DC economy is also posting employment gains after several quarters of lackluster performance. There were some 46,300 jobs created year-over-year in the month ending January 2015, JLL reports--well above the long-term average growth of approximately 38,000 jobs. Of particular significant the primary office-occupying sector – Professional and Business Services – registered 12-month job growth of 10,400 positions, the strongest rate in nearly two years.